Q2FY24 Review: Mrs Bectors Food: Strong growth continues

13 Nov 2023 , 11:39 AM

Mrs. Bectors Food (Cremica) reported yet another robust quarter with primarily volume driven sales growth of 19% and Ebitda margin expansion of 280bps to 15.6%. The direct reach in domestic biscuits has reached 0.27mn outlets and is on track to reach management’s target of 0.32mn outlets by FY24. With increase in penetration and focus on distribution led growth, analysts of IIFL Capital Services expect the top-line to grow in mid-high teens for H2FY24. Analysts of IIFL Capital Services upgrade their EPS estimates for FY24/25/26 by ~9%/8%/8%. Maintain BUY; Target Price Rs1375. 

Sales broadly in line; beat of margins: 

The sales grew by 19% (IIFLe 18%) with biscuit segment reporting a YoY growth of ~25% and the bakery segment reporting a 12% growth on a high base. The gross margin expanded by 218bps (IIFLe 200bps) on account of softening of raw material prices. The Ebitda margin expanded by 280bps (IIFLe 200bps). The Ebitda margin expanded on account of GM expansion and lower than expected other expenses (8% below IIFLe), offset partially by higher employee costs (~12%). 

Reiterate guidance of mid teens’ growth: 

Cremica’s direct reach in domestic business stood at 0.27mn outlets vs 0.25mn outlets in Q1FY24. The company remains on track to reach its target of direct reach to 0.32mn outlets by FY24. Despite the volatility in wheat prices, the company maintained its Ebitda margin guidance of ~15% in the medium term (15.6% Ebitda margin delivered in Q2FY24). Management also maintained its revenue growth guidance of mid-teens in the medium term. 

EPS upgrade for FY24/25/26 of 8-9%: 

Analysts of IIFL Capital Services upgrade their EPS estimate for FY24-26 by ~8-9% to factor in the margin beat in H1FY24. They are forecasting a revenue growth of ~19%/16%/16% for FY24/25/26 and the Ebitda margins to at ~15.2%/15.5%/15.7% over FY24/25/26.